Although we are only halfway into 2020, now is the time for cannabusinesses to evaluate their tools and technologies for next year. Why so early? Cannabis corporate structures are intricate, which increases the onboarding complexity. Add to that the fact that cannabis operations run lean, and you are left with a reduced capacity for people to strategize, onboard and produce the right amount of change management for new technology to be widely adopted by their team. As cannabis operations continue to scale while they mitigate risks due to increasing levels of compliance, it is inevitable that operators will need to uplevel their technology stack to solutions built with cannabis compliance at their core.
Cannabis experience matters
Mainstream technology companies, such as ADP, Gusto and Paychex, are unfamiliar with the complexities and regulations of the cannabis industry, and their lack of experience may cost your company valuable time, resources and expenses in the long-run. On top of that, those providers have zero tolerance for supporting cannabis operators because they process payroll through banking partners like Chase, Wells Fargo and Silicon Valley Bank.
As a cannabis business owner looking to mitigate risk, it is important to hire a payroll provider that specializes in working with cannabusinesses and has a cannabis-compliant underwriting process. For example, my company, Wurk has spent five years partnering with cannabis banks nationwide to develop a proprietary cannabis-compliant underwriting tool called Cannabis Compliance Cloud, which provides transparency and stability in underwriting cannabis businesses. This enables the movement of funds for payroll and tax purposes for compliant cannabis companies.
If your payroll provider has not put your business through a cannabis-compliant underwriting process, it is highly likely they are also supporting non-licensed cannabis businesses or they have not honestly labeled your business with their banking partner. This could result in the government seizing funds for being commingled with non-licensed cannabis business funds.
When moving from a mainstream provider who is also providing employee benefits like insurance for medical, vision, long term care, short term care and 401(k), it is important to understand if you will need new brokers and carriers. These are also areas where you want to de-risk your business.
Don’t worry, your cannabis-compliant payroll provider should have a network of these services available. A lot of times, these services are more affordable by going direct due to the young and healthy population of the cannabis workforce. It is important to get ahead of searching for new providers as you may want to shop brokers to ensure you get the best rates and plans for your business.
Why start now?
Many businesses look to January 1 to launch services with a new payroll provider. This is because taxes are reset on January 1, making the transition easier for both parties as the tax history from the previous year does not have to be reconciled and balanced before going live on the service. This reduces the amount of data you have to provide to your payroll provider.
Changing payroll providers can be a detailed practice that is often more hands-on than companies realize. There is a lead time to getting up and running properly, and for cannabusinesses, the process requires additional attention due to compliance and regulations that vary from state-to-state. It can take months for larger companies but only weeks for those with 25 employees or less.
Common disclosures include client history, employees wage history, tax history, company handbook, and HIPAA-compliant data around employee personnel records. It also includes vacation policies – which may be impacted by the state, or states, a company is operating in – and paid time off accrual figures for each individual employee. For example, a mainstream business may only work with two to three tax IDs, but cannabis MSOs could be working with 25 to 27 tax IDs. This creates more complexity in the onboarding process. However, this is where your service provider should understand the complexities of your business and simplify the process.
Implement scalable solutions
Growing cannabis businesses can financially and operationally benefit from partnering with an experienced cannabis payroll and HR service provider. Instead of retrofitting existing HR services, cannabis business owners can turn to industry providers to create programs that scale in tandem with their company and therefore free up internal resources to focus on projects that impact their customers and patients.
Plus, by selecting a cannabis-compliant solution, you are mitigating risk and establishing a long-term relationship with a vendor that solves your unique challenges. Cannabis will likely encounter more regulatory scrutiny as it becomes accepted as an essential industry, which means it is more important than ever for companies to choose a provider that understands the complexities of your cannabis business.
Keegan Peterson is CEO at Wurk.
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